REG - Coral Products PLC - Half-year Report
08/12/2020 07:00
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RNS Number : 8323H Coral Products PLC 08 December 2020
CORAL PRODUCTS PLC
("Coral" or the "Group")
HALF YEARLY REPORT
Coral Products plc, a specialist in the design, manufacture and supply of
plastic products, is pleased to report its half yearly report for the six
months ended 31 October 2020.
Financial headlines Six months to Six months to % change
31 October 31 October
2020 2019
Group sales £10.65 million £12.14 million -12.3%
Gross profit £4.29 million £4.60 million -6.7%
Underlying operating margin* 40.3% 37.9% 6.3%
Underlying operating profit (excluding finance expenses)* £994,000 £485,000 104.9%
Reported profit before taxation £541,000 £ 25,000 2,064.0%
Underlying EBITDA* £1,622,000 £1,341,000 21.0%
Underlying basic earnings per share* 0.93p 0.26p 257.7%
Proposed interim dividend per share 0.00p 0.00p
*The financial headlines disclosed as underlying represent the reported
metrics excluding separately disclosed items (being share based payment
charges, amortisation of intangible assets and other one-off costs in each
period), see note 7.
Operational and financial highlights
- I am pleased to report that the first half of this year
has seen a return to profit. This is despite the on-going Covid-19 pandemic
impact, Brexit, the China-USA trade wars, volatile currency fluctuations and
variable trading conditions.
- Ensuring that the business is Covid-19 secure for
employees and visitors is paramount. As a critical supplier our business
continued to operate under strict Covid-19 Government guidelines to support
the medical, transport, food and communication industries through the UK
lockdowns encountered this year.
- The Covid-19 pandemic caused a reduction in
profitability at Global One-Pak in the first few months of this financial
period. I am very pleased to report however that with the addition of new
Chinese suppliers in recent months profitability has returned.
- Particularly pleasing is the Group's return to profit
when considering the huge negative impact of the Covid-19 pandemic on our
customer base has meant that the new business expected from the new and
improved food packaging and the 23 litre/55 litre recycling products have not
been realised in the current period. It is expected that both will positively
impact the business in the final quarter of this financial period.
- The business cost base was reduced via improvements in
automation, labour shift pattern changes, increasing the raw material supplier
base, utilisation of the recycling plant and the integration of the Interpack
daily operation into the Mouldings operation.
- The extruded fire retardant click & fix product has been
developed with huge interest from both existing and potential new customer
base. It is expected that this will positively impact the business in the
final quarter of this year.
- The recycling plant is contributing to the business, and
has done throughout the pandemic to date. This exciting area of the business
is expected to become more and more integral to the business profitability in
the future.
- The recycling plant has gained re-processor status
enabling the business to mitigate the Government waste packaging levy incurred
on the business.
- The Group has retained its BRC food packaging
accreditation.
- The Multi-box-recycling-system (MBRS) has now been
commissioned with positive impact on sales expected over the rest of this
financial period and beyond.
- A very strong net assets position has been maintained.
Commenting on today's results, Joe Grimmond, Coral's Chairman, said:
"In my Chairman's statement that accompanied the release of the 2020 accounts
I expressed concerns over the uncertainties associated with the ongoing Brexit
situation and coronavirus pandemic. Despite these concerns I am encouraged
with the level of sales and profitability achieved over the period".
Enquiries
Coral Products plc Tel: 01942 272 882
Joe Grimmond, Non-Executive Chairman
Mick Wood, CEO
Nominated Adviser & Broker
Cairn Financial Advisers LLP Tel: 020 7213 0880
Liam Murray / Sandy Jamieson / Ludovico Lazzaretti
David Lawman (Corporate Broking)
Capital Markets Consultants Limited Tel: 07515 587 184
Richard Pearson
Chairman's Statement
Results and Financial Position
Trading in the first half of the current year shows that even though revenue
and gross profit are below the same period for last year, the gross profit %
has improved. Reported revenue was £10,645,000 (six months to 31 October
2019: £12,143,000), gross margins were 40.3% (2019: 37.9%) resulting in a
gross profit of £4,291,000 (2019: £4,601,000) in the six months to 31
October 2020. Underlying EBITDA was £1,622,000 (2019: £1,341,000).
Underlying operating profits increased to £994,000 (2019: £485,000).
Separately disclosed expenses of £230,000 (2019: £193,000) comprised the
amortisation of intangibles acquired on acquisition, share based payment
charges over employee options and redundancy costs.
Finance costs dropped slightly to £223,000 (2019: £267,000) in this period
due to the payment holidays taken in the first few months of the financial
period.
Profit before tax after including all the above items was £541,000 (2019:
£25,000).
The balance sheet net asset position remains strong at £12,645,000 (2019:
£12,945,000). This represents a solid asset platform for developing the
business.
The Group's net debt has decreased to £7,192,000 (2019: £8,625,000). The
Group has undrawn bank facilities of £2.6 million, (2019: £2.0 million).
Operations
Tatra-Rotalac Ltd
Now with a reduced cost base gained by a major re-organisation and a change in
shift patterns the business is back to profitability. Upgrades on current
manufacturing assets have enabled improved efficiencies, culminating in the
retention of a multimillion-pound three-year contract for a major
telecommunications customer. New upgraded extruded click & fix panel will
contribute in the final quarter of this financial period.
Interpack Ltd
Due to the Covid 19 pandemic the financial benefits expected of the new and
improved ice-cream packaging have yet to be realised. It is expected that this
will happen in the final quarter of this financial period. The integration of
the day-to-day activities into the Mouldings business has enabled continuity
via familiarisation of product coupled with cost reduction.
Global One-Pak Ltd
Initially this business was financially the worst hit by the Covid-19 pandemic
in the Group. New suppliers have successfully been sought to enable continuity
of supply of triggers and plungers from China. World-wide demand is expected
to remain high for the foreseeable future. With the new aforementioned supply
chain in place and even with the uncertainty of the current Covid-19 and
Brexit situation in the UK we believe the business can be managed to deliver
improved profitability in the rest of this financial period.
Coral Products (Mouldings) Ltd
Turnover for the first 6 months of this financial period was affected by the
reduction in services provided by councils and authorities as the demand for
recycling products reduced due mainly to the impact of Covid-19. This demand
is now coming back on stream and coupled with high demand for Blow moulding
products (supplied into wet wipe and sanitizing companies), high demand for
transportation and telecommunication products, along with the resurgence of
food container products the business is set to benefit from increased turnover
and profitability.
The recycling plant is fully operational and the objective of giving the
business a full 360 degree offering across the recycling spectrum has been
achieved. It has maintained its re-processor accreditation making it a go to
site for the customer base.
Focus on adding high levels of recycled material to new containers is a major
objective for the site to offset the forecasted £200 per tonne plastic tax
set to be implemented in April 2022 for products made with less than 30% of
recycled content. We are pleased to report that Mouldings is well down the
road to achieving the objective in advance of the deadline.
The industry anticipated MBRS (multi-box recycling system) is now being made.
It is expected that it will contribute to profitability during this financial
period.
Capital expenditure
Total capital expenditure in the first six months was £315,000 (2019:
£650,000) of which £nil (2019: £69,000) related to Tatra-Rotalac, £nil
(2019: £375,000) related to Interpack, and the balance expended on the tools
for the multi box recycling system (MBRS) at Coral Products (Mouldings).
Dividends
Whilst there has been a marked improvement of performance in the first half of
this year, the Board has decided to defer any decision on dividend for the
current year until we see the outcome of the coronavirus pandemic.
Brexit
With the imminent departure of the United Kingdom from the European Union, as
a business, we continue to focus on operational cost control to enable an
improved gross margin.
We know that the impact at the UK docks towards the end of 2020/early 2021
will be challenging, delays are expected. A constant monitoring of supplies to
the plants is on-going with extra working capital used to purchase raw
materials in advance. Our focus remains that of cost control across the two
manufacturing subsidiaries. These will be supplemented increasingly by the
recycling business which we believe will leave the Group on a sound footing
both during and after the completion of the UK's departure from the European
Union.
Outlook
In my Chairman's statement that accompanied the release of the 2020 accounts I
expressed concerns over the uncertainties associated with the ongoing Brexit
situation and coronavirus pandemic. Despite these concerns I am encouraged
with the level of sales and profitability achieved over the period.
Cost reduction controls now in place, the recycling plant delivering to
overall profitability coupled with continued and increased demand for
Covid-19-related products, telecommunications, transport, food product
packaging and recycling containers gives me great confidence for the future
prospects and performance of the Group.
Joe Grimmond
Non-Executive
Chairman
8 December 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months to 31 October 2020
Six months to Six months to Year to
31 October 31 October 30 April
2020 2019 2020
Notes (unaudited) (unaudited) (audited)
£000 £000 £000
Revenue 3 10,645 12,143 22,321
Cost of sales (6,354) (7,542) (14,329)
Gross profit 4,291 4,601 7,992
Operating costs
Distribution expenses (544) (622) (1,296)
Administrative expenses before separately disclosed items (2,753) (3,494) (6,295)
Underlying operating profit 994 485 401
Separately disclosed items:
Share based payment credit/(charge) 2 (7) (14)
Amortisation of intangible assets (138) (138) (277)
Reorganisation costs (94) (48) (142)
Impairment loss on goodwill - - (350)
(230) (193) (783)
Operating profit/(loss) 764 292 (382)
Finance expense (223) (267) (439)
Profit/(loss) before taxation 541 25 (821)
Taxation 4 - - -
Total comprehensive income/(loss) 541 25 (821)
Earnings per ordinary share 5
Basic and diluted (pence) 0.66 0.03 (0.99)
Underlying basic (pence) 0.93 0.26 (0.05)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2020
31 October 31 October 30 April
2020 2019 2020
(unaudited) (unaudited) (audited)
£000 £000 £000
Non-current assets
Goodwill 5,145 5,495 5,145
Other intangible assets 986 1,263 1,124
Property, plant and equipment 2,768 9,406 2,790
Right of use assets 4,058 835 4,365
Total non-current assets 12,957 16,999 13,424
Current assets
Inventories 3,395 3,667 3,368
Trade and other receivables 4,575 5,783 4,931
Cash and cash equivalents 1,292 436 453
Total current assets 9,262 9,886 8,752
Assets held for sale 2,520 - 2,520
Current liabilities
Bank overdrafts and borrowings (2,526) (4,779) (2,978)
Trade and other payables (3,212) (4,473) (3,749)
Lease liabilities (1,393) - (1,191)
Corporation tax - (43) -
Total current liabilities (7,131) (9,295) (7,918)
Liabilities on assets held for sale (1,706) - (1,765)
Non-current liabilities
Borrowings (1,000) (4,282) -
Lease liabilities (1,859) - (2,509)
Deferred taxation (398) (363) (398)
Total non-current liabilities (3,257) (4,645) (2,907)
Total liabilities (12,094) (13,940) (12,590)
Total net assets 12,645 12,945 12,106
Equity
Share capital 826 826 826
Share premium 5,288 5,288 5,288
Other reserves 1,567 1,567 1,567
Retained earnings 4,964 5,264 4,425
Total equity 12,645 12,945 12,106
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the six months to 31 October 2020 (unaudited)
Share Share Other Retained Total
capital premium reserves earnings equity
£000 £000 £000 £000 £000
At 1 May 2020 826 5,288 1,567 4,425 12,106
Total comprehensive income - - - 541 541
Charge for share based payment - - - (2) (2)
Dividend paid - - - - -
At 31 October 2020 826 5,288 1,567 4,964 12,645
For the six months to 31 October 2019 (unaudited)
Share Share Other Retained Total
capital premium reserves earnings equity
£000 £000 £000 £000 £000
At 1 May 2019 826 5,288 1,567 5,232 12,913
Total comprehensive income - - - 25 25
Credit for share based payment - - - 7 7
Dividend paid - - - - -
At 31 October 2019 826 5,288 1,567 5,264 12,945
For the year ended 30 April 2020 (audited)
Share Share Other Retained Total
capital premium reserves earnings equity
£000 £000 £000 £000 £000
At 1 May 2019 826 5,288 1,567 5,232 12,913
Total comprehensive loss - - - (821) (821)
Credit for share based payment - - - 14 14
Dividend paid - - - - -
At 30 April 2020 826 5,288 1,567 4,425 12,106
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months to 31 October 2020
Six months to Six months to Year to
31 October 31 October 30 April
2020 2019 2020
(unaudited) (unaudited) (audited)
£000 £000 £000
Cash flow from operating activities
Profit/(loss) for the period after tax 541 25 (821)
Adjustments for:
Depreciation of property, plant and equipment 321 733 1,032
Depreciation of right of use assets under IFRS16 307 - 681
Goodwill impairment - - 350
Amortisation of intangible assets 138 138 277
Share based payment (credit)/charge (2) 7 14
Interest payable 223 267 439
(Increase)/decrease in inventories (27) (162) 137
Decrease/(increase) in trade and other receivables 386 (262) 563
(Decrease)/increase in trade and other payables (537) 639 (87)
Net cash generated from operating activities 1,350 1,385 2,585
Cash flow from investing activities
Acquisition of property, plant and equipment (314) (17) (322)
Net cash used in investing activities (314) (17) (322)
Cash flow from financing activities
Interest paid (223) (267) (135)
Interest paid on lease liabilities - - (304)
Repayments of bank borrowings (60) (93) (188)
Repayments of obligations under lease liabilities (462) (672) (1,180)
New bank loans raised 1,000 500 500
New lease liabilities - - 58
Movements on invoice discounting facility (452) (373) (534)
Net cash used in financing activities (197) (905) (1,783)
Net increase/(decrease) in cash and cash equivalents 839 463 480
Cash and cash equivalents at the start of the period 453 (27) (27)
Cash and cash equivalents at the end of the period 1,292 436 453
1. Basis of preparation
The financial information set out in this Interim Report does not constitute
statutory accounts as defined in Section 435 of the Companies Act 2006.
The Group's statutory financial statements for the year ended 30 April 2020,
prepared under IFRS, are in the process of being filed with the Registrar of
Companies. The auditor's report on the statutory accounts for the year ended
30 April 2020 was qualified with respect to inventory having a carrying value
of £3,368,000 as the audit evidence available was limited because, given the
global Covid-19 pandemic, no inventory count was undertaken and the auditor
did not observe the physical inventory as at 30 April 2020. In respect solely
of the limitation relating to inventory, the auditor did not obtain all the
information and explanations considered necessary for the purpose of the audit
and were unable to determine whether adequate accounting records had been kept
by the parent company.
The interim financial information has been prepared in accordance with the
recognition and measurement principles of International Financial Reporting
Standards (IFRS) and on the same basis and using the same accounting policies
as used in the financial statements for the year ended 30 April 2020.
The Interim Report has not been reviewed by our auditor in accordance with the
International Standard on Review Engagement 2410 issued by the Auditing
Practices Board.
2. Significant accounting policies
The accounting policies applied by the Group in these condensed consolidated
interim financial statements are the same as those applied by the Group in its
consolidated financial statements for the year ended 30 April 2020.
3. Revenue
All production is based in the United Kingdom. The geographical analysis of
revenue is shown below:
Six months to Six months to Year to
31 October 2020 31 October 2019 30 April 2020
(unaudited) (unaudited) (audited)
£000 £000 £000
United Kingdom 9,676 11,433 20,882
Rest of Europe 874 648 916
Rest of the World 95 62 523
10,645 12,143 22,321
Turnover by business activity
Sale and manufacture of plastic products 10,645 12,143 22,321
4. Taxation
The taxation charge for the six months to 31 October 2020 is based on the
effective taxation rate, which is estimated will apply to earnings for the
year ending 30 April 2021. The rate used is below the applicable UK
corporation tax rate of 19% due to the utilisation of tax losses in the
period.
5. Earnings per share
Basic and underlying earnings per ordinary share are calculated using the
weighted average number of ordinary shares in issue during the financial
period of 82,614,865 (31 October 2019: 82,614,865 and 30 April 2020:
82,614,865).
Six months to Six months to Year to
31 October 2020 31 October 2019 30 April
(unaudited) (unaudited) 2020
(audited)
£000 p £000 p £000 p
Basic and diluted earnings per ordinary share
Profit/(loss) for the period after tax 541 0.66 25 0.03 (821) (0.99)
Underlying earnings per ordinary share
Underlying profit/(loss) for the period after tax 771 0.93 218 0.26 (38) (0.05)
6. Movement in Net Debt
Net debt incorporates the Group's borrowings and bank overdrafts less cash and
cash equivalents. A reconciliation of the movement in the net debt is shown
below:
Six months to Six months to Year to 30 April
31 October 31 October 2020
2020 2019 (audited)
(unaudited) (unaudited)
£000
£000 £000
Net increase in cash and cash equivalents 839 463 1,014
Decrease/(increase) in bank and other loans 510 (9) (312)
(Decrease)/increase in lease liabilities (551) (862) (475)
Movement in net debt in the financial period 798 (408) 227
Net debt at beginning of period (7,990) (8,217) (8,217)
Net debt at end of period (7,192) (8,625) (7,990)
7. Underlying profit and separately disclosed items
Underlying profit before tax, underlying earnings per share, underlying
operating profit, underlying earnings before interest, tax, depreciation and
amortisation are defined as being before share based payment charges,
amortisation of intangibles recognised on acquisition, acquisition costs,
reorganisation costs, compensation for loss of office, impairment of goodwill
and impairment loss on trade receivables. Collectively these are referred to
as separately disclosed items. In the opinion of the directors the disclosure
of these transactions should be reported separately for a better understanding
of the underlying trading performance of the Group.
Six months to Six months to Year to 30 April
31 October 31 October 2020
2020 2019 (audited)
(unaudited) (unaudited)
£000
£000 £000
Operating profit/(loss) 764 292 (382)
Separately disclosed items within administration expenses
Share based payment (credit)/charge (2) 7 14
Amortisation of intangible assets 138 138 277
Reorganisation costs 94 48 142
Impairment of goodwill - - 350
Total separately disclosed items 230 193 783
Underlying operating profit 994 485 401
Depreciation 628 856 1,731
Underlying EBITDA 1,622 1,341 2,114
8. Forward looking statements
This announcement contains unaudited information and forward-looking
statements that are based on current expectations or beliefs, as well as
assumptions about future events. These forward-looking statements can be
identified by the fact that they do not relate only to historical or current
facts and undue reliance should not be placed on any such statement because
they speak only as at the date of this document and are subject to known and
unknown risks and uncertainties and can be affected by other factors that
could cause actual results, and Coral's plans and objectives, to differ
materially from those expressed or implied in the forward-looking statements.
Coral undertakes no obligation to revise or update any forward-looking
statement contained within this announcement, regardless of whether those
statements are affected as a result of new information, future events or
otherwise, save as required by law and regulations.
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014 (MAR). The Directors of the Group take responsibility
for this announcement.
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